macroeconomic

Macroeconomic Problem

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Introduction

Today , when we look into the economic conditions of US and even worldwide , the events that first come to our minds are related to higher and even higher oil prices , shortage of food commodities like rice increase in price of gold , depreciation of dollar as compared to foreign economies and also the falling housing prices . In this I will talk about how a slump in US housing market has affected

the over all US economy and factors related to it

In this I will adopt the approach of demand and supply forces in to elaborate why the housing sector fall from the heights it was climbing since many years . My will show how the two forces of demand and supply were forced to a new point of non equilibrium and resulted in falling prices because prices of all goods are dependent on the equilibrium point of the two forces . The plunging housing sector activity has further added to the recessionary US economy this year by affecting all other sectors in a way that consumers have lost their confidence after seeing drastic plunges in housing market . Falling by 3 .1 in the first quarter , the housing sector is still forecasted to drop even further posing threats and dangers of more recession to the US economy by the end of the year . As advocated by masses , US economy is heading towards its second great economic depression effecting economies through out the globe , therefore it is time that the establishment must take corrective measures to bring this equilibrium to a stable state in to get the confidence back that the consumers and investors have lost in recent years

Reasons behind Slump in the recent years

As the recession in all the markets are directly related to the forces of demand and supply , US housing market has also been a puppet in the hands of these forces . The equilibrium price satisfying both supply and demand was forced to be set lower then what the market has originally worthed as the radical increase in accommodation and housing plans have created an excess supply in the market that is way beyond then the markets potential demand , thus resulting in lower prices .In to evaluate in depth why this has been the case , first we need to sow how the market was enabled to reach it heights from the period 2002 - 2006

First of all the liquidity in market increased that gave a better chance to the buyers to invest in the market freely on their own will

It was this period when investing in property was seen be the best investment as compared to all other returns on capital investment in the recessionary period . People , naturally got attracted to the property business that promised to earn easy sure short money in relatively less time and the profits were many folds...